Indonesia’s Inflation in 2023 Could Decrease But Remain High

Source: Dimas Ardian/Bloomberg

Inflation is still a tough challenge for Indonesia. Bank Indonesia (BI) estimates that 2023 inflation in Indonesia could reach 4%. This forecast shows a decrease compared to 2022 which reached 5.51%, but it is still high.

BI Governor Perry Warjiyo at the 2023 National Coordination Meeting of Regional Heads and FORKOPIMDA, at the Sentul International Convention Center, Bogor, Tuesday (17/1/2023) explained, “If we look at the 2023 inflation projection it will be seen, nationally it will indeed fall, less more like 3% to 4% in the second half.”

Perry said that inflation in 2023 in almost all regions is expected to be higher than the previous projection. This is in line with economic growth and domestic demand which were revised up from previous estimates.

Therefore, Perry appealed to all stakeholders to work together in controlling inflation.

“In the first half, inflationary pressure was still high, food and prices were regulated by the government in the first semester of 2023, we need to control it,” Perry said again.

BI noted that several regions will face increases in food prices. Issues of various factors such as weather, availability of supplies, and distribution of goods must be of particular concern to the authorities.

“It seems there is a tendency for Balinusra (Bali Nusa Tenggara), Sumatra, Sulawesi, and Papua to have a tendency for inflation to rise,” Perry explained.

Furthermore, from the point of view of core inflation which describes receipts and supply, the central bank will control it from a monetary perspective by coordinating with the government.

Perry revealed, controlling it in the region is the foundation. Therefore, both ministries, institutions, and local governments can optimize their budgets.

Cooperation between regions is also very important, optimizing food distribution, infrastructure, and horticultural food security and strengthening coordination and communication must also be carried out.

Previously, looking at last year, according to a report from the Central Statistics Agency (BPS), Indonesia experienced inflation of 5.51% throughout 2022. This figure was the highest inflation record in the last 8 years as shown in the chart.

Head of BPS Margo Yuwono revealed that the highest inflation in 2022 occurred in the transportation expenditure group, namely 15.26% with a share of 1.84%.

Then the personal care expenditure group experienced inflation of 5.91% with a share of 0.37%; the food, beverage, and tobacco group 5.83% with a share of 1.51%; as well as the food and beverage/restaurant provision expenditure group of 4.49% with a share of 0.4%.